What is Real Estate Syndication and Passive Investing?

Have you ever heard people say they are passively investing in real estate? Those people have passive income.

You may be wondering what real estate syndication, passive investing and active investing means or how it all works.

Maybe you even have some questions, including:

Is it just for the rich?
How can you invest passively, and what are the benefits?
What is group investing or syndication? tropical farmland

Those are great questions, and sometimes it can be a bit overwhelming at first, but I’m here to help…so, let’s dive right in!

Active investing is just what it sounds like. An active investment is one you are actively managing. Here’s an example: You are an owner of a property, and you manage it in some form… maybe you’re managing the whole property, paying bills, setting up contractors to work on the property, managing the reservations on Airbnb, VRBO or any other OTA (online travel agency), etc. You are an active investor because you are doing the work to maintain the property and its value.

Passive investing is when you invest in a property or another investment, and there is little to no effort to earn or maintain it.

Since we are on the topic of real estate, a great example of passive investing would be if you own a resort or condo or if you’re an investor in a group investment, and they take care of EVERYTHING. That is truly a passive investment.

What is group investing or syndication?

Syndications are used all over the world. The majority of the malls, apartment buildings and high rise buildings are group investments or syndications. Most motion pictures are as well. Yes…you can syndicate pretty much anything you want!

What is a real estate syndication, and how does it work?

Real estate syndication is a way for investors to pool their money and intellectual resources to invest in properties and projects much bigger than the investor can afford on their own.

This was kicked into overdrive when The Jumpstart Our Business Startups Act passed in 2012. This is the same Act that helped to create crowdfunding.

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How does it work?

First, a sponsor finds a deal and operates it. This investor would be the active investor. He/she invests their time, sweat equity and money in the deal. They find the property, manage the day-to-day operations, raise the funds and other duties as needed.

The sponsor usually invests 5-20% of the total required equity capital. Then, other investors put in between 80-95% of the total. These investments have a minimum investment around $50,000. For that investment, the investor can make a return on that investment, and normally they are paid quarterly.

Syndications are usually structured as a Limited Liability Company or a Limited Partnership. The Sponsor participates as the General Partner or Manager. And the investors participate as limited partners or passive members.

Everyone who invests receives some share of the profits.

To learn more, watch our webinar on How to Passively Invest. You’ll enjoy hearing from our Securities Lawyer and CPA, and they both discuss the benefits of passive investments and how to use retirement funds to invest.

If you’re interested in what syndication is all about then check out The Real Estate Guys Radio Show’s Secrets of Successful Syndication Seminar. They host it twice a year, and the next event in March is sold out. However, join us at the following event this fall by getting on the advanced notice list here . Whether you are interested in being a sponsor or investing in a syndication, you can enjoy this seminar!

Due to SEC rules and regulations with different deals, some deals can only be shared with accredited investors and others can be shared with anyone. We normally have two to three options for investors to choose. In order to learn what those options are or how you can join a syndication, you’ll need to consider your investment philosophy and your needs and wants related to your retirement plans.

Do you want to preserve your wealth?

Do you want to grow your wealth?

Do you need tax mitigation?

As the owner of Caribbean Capital Group, my goal is to help Main Street Investors like you invest in communities and keep money off Wall Street. I am happy to have a conversation to see if one of the investment opportunities we have is right for you. We’ll go over how to invest in a deal and see which one is the best fit.

Schedule a call, and we’ll discuss how to get you a slice of paradise.

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[…] Private Placement, also known as group investing,  is a private funding round of securities that are sold not through a public offering, but rather […]

[…] Recently, we discussed what it means to invest passively in real estate and the benefits of passively investing. If you missed those newsletters, you could view them on our blog page. The ones to review are How to Invest in Private Placements for Busy Professionals and What is Real Estate Syndication and Passive Investing? […]

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